Royal commission prompts Australians to switch super funds

By Nina Hendy

The banking royal commission is cultivating a superannuation switching culture that could have a major impact on super fund memberships in the coming year, new research reveals.

More than one in three Australians are more likely to review their superannuation fund in the next 12 months as a result of the royal commission.

Young Australians appear to be the most rattled of all, with 42 per cent of 18-24 year-olds wanting to switch funds – higher than any other age group.

This compared with 37 per cent of people aged 25-34 wanting to switch, 34 per cent of 35-44 year-olds, 38 per cent of 45-54 year-olds and 34 per cent of 55-64 year-olds. New superannuation player Zuper commissioned The Digital Edge to undertake the online survey of 1,514 Australians.

Esha Thaper ignored her superannuation in her 20s but has recently consolidated her accounts into a new fund.Credit:James Alcock

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Only one in four Australians aged 65 and over were considering switching funds. In addition, the desire to review superannuation was highest among higher income earners.

The royal commission has attracted strong media attention in recent months, denting the image of super funds, especially the for-profit retail funds run by the banks and other financial services companies.

The survey findings suggest the royal commission is making Australians question the quality of services they receive from traditional service providers.

Meanwhile, recent Deloitte research found that two out of three customers don’t believe the financial services industry can be trusted.

Seeking greater control

Sydney’s Esha Thaper switched funds a month ago in search of greater control over her money, moving to Zuper. Switching funds and consolidating her accounts took her 30 minutes.

Esha Thaper found switching super took her about 30 minutes.Credit:James Alcock

The 33-year-old content writer for an insurance company recently started paying more attention to her super, admitting that growing her nest egg hadn’t crossed her mind when she was younger.

“Super is such a significant amount of money, which gives us our livelihood in our old age, and yet I wasn’t thinking about it in my 20s at all. I decided to be more proactive about what was happening with my money,” Ms Thaper said.

The number of people proposing to review their superannuation fund is significant, given that the superannuation churn rate has been estimated previously as low as 3.2 per cent.

In the three years to November 2015, the average amount of superannuation switched each year was over $35 billion – the result of 3.2 per cent of superannuation products being switched annually, Roy Morgan figures reveal.

New playing field

The disaffection among super fund members has mainly benefited the not-for-profit industry funds.

AustralianSuper revealed it has also received more than $1 billion from new customers in each of July and August – double the amount of new business received the same time last year. With more than $140 billion in funds under management, AustralianSuper is the nation’s largest super fund.

Bank-owned super funds have also been forced to slash fees on no-frills accounts to match or even be cheaper than the charges imposed by industry super funds, Rainmaker research shows.

Zuper chief executive Jess Ellerm believes the growing switching culture in Australia could also boost new fintech players like her company.

“While we’ve been live for just on seven weeks, the real-life data backs up our research on willingness to switch. We have a 25 per cent conversion rate to full member account, and 50 per cent of new members fund their account from day one. It’s early days, but the growth is extremely promising.”

Zuper, like Spaceship and Grow Super, is a for-profit super product targeting Millennials by using technology to lift engagement. Zuper has a low fee model, with fees below the average of APRA-regulated funds, according to data published by the Productivity Commission.

Xavier O'Halloran, acting head of advocacy at the Superannuation Consumers' Centre at Choice, said it was not surprising to see increased interest in switching funds.

"It's little wonder people are moving away in droves from the poor performing funds named in the royal commission," Mr O'Halloran said.

"The evidence before the commission showed some super funds were clearly prioritising profits to their parent banks over their best interest duty to members.

"It serves as a good reminder to take a close look at how your fund has been performing over the long term and its fees. For a typical worker, a fee 0.5 per cent higher over a lifetime can make you $100,000 worse off in retirement."